The federal budget deficit was $941 billion during the first eight months of fiscal year 2010, CBO estimates in its latest monthly budget review, $51 billion less than the shortfall recorded over the same period last year. Both revenues and outlays were lower than the corresponding amounts during the same period last year, by 2 percent and 3 percent, respectively.
Outlays through May were $80 billion (or 3 percent) lower than in the first eight months of fiscal year 2009, CBO estimates. The net reduction in spending reflects sharply lower outlays for the costs of the Troubled Asset Relief Program, for Treasury’s payments to Fannie Mae and Freddie Mac, and for the net costs of federal deposit insurance; altogether, outlays for those activities declined by $336 billion relative to outlays in the first eight months of 2009.
Apart from outlays for those financial programs, spending through May was $257 billion (or 12 percent) higher than in the same period last year, CBO estimates. More than one-third of that increase stemmed from provisions in the American Recovery and Reinvestment Act (ARRA). Most of the growth in ARRA-related spending was for grants to states made by the Department of Education, additional unemployment benefits, refundable tax credits, and the federal share of Medicaid assistance.
Excluding amounts provided by ARRA, Medicaid outlays rose by 5.5 percent through May, exceeding the 4.7 percent increase in Medicare spending. Social Security outlays grew more slowly through May than in fiscal year 2009 as a whole (up 6 percent compared to close to 9 percent last year), primarily because of there was no cost-of-living adjustment in 2010. Outlays for net interest on the public debt were 22 percent higher through May than in the same period last year. Much of that growth reflects the cost of inflation adjustments for indexed securities.
Receipts in the first eight months of this fiscal year were about $29 billion lower than those in the same period last year. A decline of about $71 billion (or 6 percent) in individual income and payroll taxes accounts for the overall reduction in receipts. Although withheld receipts have declined for the eight months as a whole, they have increased over the previous year’s amounts in recent months, as employment has started to grow. Increases of about $13 billion (or 18 percent) in net corporate receipts (primarily from larger-than-expected payments of 2009 taxes made during the current fiscal year) and about $30 billion in receipts from the Federal Reserve offset some of the drop-off in receipts from individuals’ taxes.
The monthly budget review was prepared by Elizabeth Cove Delisle, Barbara Edwards, Kathleen Gramp, and Joshua Shakin.